"Fit for 55": Does the European Commission's bold initiative live up to its ambitions?

Last July, the European Commission proposed a new Climate Package, titled “Fit for 55,” with the goal of adapting EU policies to achieve a 55% reduction in greenhouse gas emissions by 2030, followed by net-zero emissions by 2050 (the “Green Deal” target). Transportation is clearly a key focus of this set of regulatory proposals. Unlike other sectors, transportation emissions have risen steadily, making transportation the second-largest emitting sector in the EU, after electricity generation. At this stage, these are only proposals, and not all of them will be adopted by the European Parliament and the European Council, but they are indicative of the regulatory trends that will emerge in the EU in the near future.

Here is a summary of the main implications for the transportation sector.

Key Points on Maritime Transport: Introduction of Greenhouse Gas (GHG) Emission Quotas and a Requirement to Use Lower-Carbon Fuels

• Under the EU ETS (Emissions Trading System), Shipping companies will be required to pay issuance fees for all emissions from voyages between European ports and for half of the emissions from voyages to or from non-European ports, without having free allowances ^[1].
• A energy carbon intensity target, taking into account the upstream production of fuels, A cap on emissions for ships calling at European ports will be introduced and phased in—from -2% in 2025 to -75% in 2050 compared to 2020 ^[2].

C4 Analysis:

• Since the majority of emissions from the largest container shipping companies are generated during international voyages, Including voyages to or from non-European ports constitutesa big step forward.
• The Commission could go even further by ensuring a Allocation of ETS Revenues toward investments that promote the decarbonization of maritime transport (in alternative energy sources, for example).
• It could also offer measures thatencourage market participants to invest in low-emission vessels, which is not the case with the measures proposed in this package,as well as specific support measures for the development of e-fuels, bio-LNG, or advanced liquid biofuels. To meet the proposed intensity targets, operators will likely switch to fossil gas (for ships equipped with dual-fuel LNG propulsion), which will significantly slow down the sector’s decarbonization ^[3].

Key Points on Air Travel: Elimination of free emissions allowances, higher taxes on fossil fuel emissions, and a requirement to use lower-carbon fuels

• As part of the ETS system, the new Climate Package proposes a accelerating the reduction of quotas falling to -4.2% per year starting in 2023 (compared with -2.1% previously) and the elimination of free allowances for intra-European flights by 2027.
• Exempt from tax to date A progressive tax on kerosene is proposed for intra-European flights at a minimum rate of 38 c€ per liter starting in 2033 for commercial flights, and 2023 for private aviation (business or recreational) ^[4].
• Finally, a mandatory SAF enrollment order (advanced biofuels and e-kerosene) at European airports is proposed, gradually increasing from 2% in 2025 to 63% in 2050^[4]. It plans to exclude crop-based biofuels (first-generation).

C4 Analysis:

• All of these measures are a step in the right direction since they better reflect the CO2 externality in air travel costs and encourage the development of low-carbon energy alternatives.
• However, flights outside Europe, which account for more than 60% of emissions, are still not taken into account (they would be subject only to the ICAO’s international system—CORSIA—which is not very restrictive) ^[5]. On the other hand, emissions other than CO2 (condensation trails and induced cirrus clouds; see our article (on this subject)accounting for half to two-thirds of aviation's impact on the climate ^[6]are not addressed in the proposal.
• Finally,The date when the tax on kerosene for commercial flights will take effect is still a long way off.

Fuel Facts: Increased Targets for the Use of Renewable Alternative Fuels

• The new Climate Package proposes shifting from a target of at least 14% renewable energy in the sector’s energy consumption to a target of reducing carbon intensity by 13% by 2030, compared to a baseline level of fossil fuel emissions ^[7]. The objective would no longer cover only road and rail transportation but all forms of transportation ^[8].
• The proposal calls for a reduction in the sub-target for advanced biofuels produced from waste/residues from 3.5% to 2.2% in 2030 ^[7] but also to eliminate the multipliers (for advanced biofuels, used oils, etc.), which ultimately makes the new, more ambitious sub-goal^[8].
• For the first time, the European Commission introduces a target for the supply of "green" e-fuels (hydrogen and e-fuels), at 2.6% over the same time frame ^[7].
• Some objectives are also available for the installation of electric vehicle charging stations, starting in 2025, and hydrogen, starting in 2030, along the main routes connecting European cities ^[8].

C4 Analysis:

• The new goal is ambitious because it would allow to increase the share of alternative energy in road transportation to more than 20% by 2030^[9] (compared with 14% previously).
• On the other hand, the sub-objective aimed at The introduction of "green" e-fuels raises questions because more efficient battery-powered alternatives are already available. It could create a direct competition with the aviation and maritime sectors, which are more difficult to decarbonize, and for which e-fuels seem to be a more suitable option.
• Finally, the Commission could have gone further by removing soy from the list of ingredients that can be used to meet the targets ^[9]. That won't stop some countries, such as France, Germany, and Sweden, from phasing it out before 2030, if they so choose.

Key Facts About Road Transport: Introduction of Emissions Quotas and Tighter CO2 Emissions Standards for Light-Duty Vehicles

• The Commission proposes toinclude the road transport sector (presumably from passenger cars to heavy-duty vehicles) in the emissions trading system starting in 2026, with the goal of reducing emissions by 43% by 2030 compared to 2005 ^[1].
• The Commission also wishes to increase the CO2 emissions reduction target a 55% reduction for new passenger cars (compared with the current 37.5% reduction) and a 50% reduction for new light commercial vehicles (compared with the current 31% reduction) by 2030 compared with 2021, and transition to 100% new “zero-emission” passenger cars and light-duty vehicles starting in 2035 ^[10].
• This proposal also calls for eliminate the ZLEV credit (Zero and Low Emission Vehicle, intended to promote 100% electric and plug-in hybrid vehicles in the calculation of manufacturers' average emissions) starting in 2030.

C4 Analysis:

• The goal of Making the switch to all-electric vehicles starting in 2035 is very ambitious, and demonstrates the Commission's commitment to driving the European industry toward dominance in the new global market for electric vehicles.
• The elimination of the ZLEV credit is good news since it disproportionately rewards plug-in hybrid vehicles (PHEVs), whose emissions are more than three times higher in real-world driving than in WLTP certification tests (see our previous article (for more details). However, the expiration of the program, scheduled for 2030, remains distant and the intermediate goal CO2 reduction from cars and light commercial vehicles remainsunchanged for 2025 (-15% in CO2 emissions compared to 2021), which does not provide an incentive to accelerate the transition in the short term.

Conclusions

With the "Fit for 55" package, the European Commission is proposing to begin translating the goal of climate neutrality into concrete measures. The The proposals are ambitious : The Commission plans not only to ban the sale of internal combustion engine vehicles by 2035, but also to take concrete action to address emissions from intra-European flights and maritime freight whose current climate policies are woefully inadequate. More broadly, targets for reducing the carbon intensity of fuels are being considered for the transportation sector as a whole. It is regrettable, however, that the rail transport is not specifically mentioned in the proposals. While this sector is certainly already aligned with the Green Deal’s goals, we must not lose sight of the fact that it plays a key role in decarbonizing the sector through modal shift.

The The challenge now is to get these measures approved by the Council and Parliament, as the debate is expected to be heated. Will the Climate Package emerge unscathed?